If it lasts, shutdown could make history

State government has been shut down now for a full week, and a budget agreement between Gov. Mark Dayton and GOP legislative leaders is nowhere in sight.

The standoff puts Minnesota in the national spotlight as the only state to not pass a budget. If the shutdown lasts until Sunday, it will be the longest state government shutdown since 2002.

Dayton and GOP legislative leaders did not meet Thursday to discuss the overall budget, but they did meet briefly as negotiations intensified over the K-12 budget bill. There were no offers exchanged, but an outside group made a proposal.

A commission formed by former Vice President Walter Mondale and former Gov. Arne Carlson issued recommendations that called for $2.2 billion in permanent spending cuts and $1.4 billion in tax increases. That includes a tobacco tax increase of $1.29 per pack of cigarettes, a Medicaid surcharge on hospitals, and an alcohol tax increase. The commission also recommends a temporary income tax increase on every Minnesotan.

Commission co-chair Wayne Simoneau, a former DFL legislator and Finance Commissioner, defended their call for all Minnesotans to pay more.

"We're all in this together," he said. "We're all Minnesotans. We work here. We enjoy these privileges of the state and we all are responsible for getting us out of that debt."

Dayton issued a statement praising the commission for its work. He said the plan is in line with his budget proposal, but he took issue with the income tax hike on every Minnesotan.

Republican House Speaker Kurt Zellers called the proposal a retread of failed tax and spend policies and said Republicans would not support any tax increase. GOP Senate Majority Leader Amy Koch said her caucus will reject any tax hikes and renewed her plea for Dayton to call lawmakers back into a special session.

"Forty-nine out of 50 states, the governors have gotten a budget resolution. It's incumbent on all of us, but we need the governor to step up and lead," she said.

When pressed, Koch agreed that 49 other legislatures also finished their work. She refused to say whether Republicans would submit a budget offer to Dayton — something they haven't done since the shutdown started a week ago.

Dayton said earlier this week that Republicans need to put forward their ideas if they don't like his.

"I've offered two serious options and if they don't want either one of those, then it's incumbent on them to come back quickly and get this resolved so we can get state government back to work again," Dayton said.

Both of Dayton's offers make longer delays in payments to K-12 schools. Dayton criticized the K-12 shift during his time as governor but argued the shutdown has changed priorities. Last week, Republicans also proposed a lengthened K-12 shift along with borrowing against future tobacco payments as a solution.

The use of accounting gimmicks and one-time money bothered members of the Carlson-Mondale commission and it bothers former Revenue Commissioner John James. He said Dayton and lawmakers should look seriously at expanding the sales tax to help fix the problem.

"One-time things are just a terrible mistake, especially since we're going through all of the pain of a shutdown," James said. "To end this thing in that fashion, I don't think is a sensible thing to do."

Bond rating agency Fitch, also is unhappy with Minnesota's patchwork budget fixes. It downgraded the state's credit rating a notch on Thursday.

MINNESOTA A FISCAL OUTLIER

The National Conference of State Legislatures said Minnesota is just one of five states that have shut down government since 2002 and most were a for a few hours or a few days.

Susan Urahn, with the Pew Center on the States, said shutdowns are unusual because some states can continue government operations even when no budget deal is reached. But she said Minnesota is an outlier for another reason: it's the only state that didn't have its budget completed by the start of the fiscal year.

"While ordinarily you look last year or a couple of years ago, several states have missed that deadline because they can't quite come to agreement," Urahn said. "This year, virtually every other state in the country was able to make the deadline and Minnesota was the only one that ran beyond."

Urahn said only two states raised taxes significantly this year to balance budgets but she said more than half of the states raised taxes in 2009 to fix budget problems for the 2010 budget cycle.